Question

SECTION (3] SHORT ESSAY [20%] INSTRUCTIONS: 1. WRITE YOUR ANSWER IN THE SPACE PROVIDED WITH CLEAR ARGUMENTS. 2- USE THE FORMAT WITH INTRODUCTION, BODY TEXT AND CONCLUSION. Below is the graph from Tradingeconomics on the unemployment rate in Russia: 55 ...11 45 Ju 2019 Oct 2019 Jan 2020 Apr 2020 Now, if Russia wants to control inflation, your task is to: 1. Define the phase of the business cycle that Russia is going through. 2. To choose and discuss appropriate monetary policy. 3. Draw the graph showing original situation in the economy and then fixed condition (Use the format with introduction, body text and conclusion)

Answer 1

1 - As we can see from the above graph that the rate of unemployment is rising. This means that the economy is in the phase of recession and in contraction phase of business cycle

2 - Expansioanry monetary policies such as decrease in reserve requirement , open market purchase and decline in discount rates will increase the money supply , liquidity in the economy. This will help to boost the consumption and investment and ultimately aggregate demand. Hence the economy will be able to come out of this phase.

3 - In the graph below , the AD was the initial level creating the recessionary gap when real GDP was Q , which was below the potential level of Q1.

After the policy , the AD rises to AD 1 , and reaches the potential GDP of Q1 and price level rises. The AD after rise has been shown with dotted line.

GLRAS bo sri sloued to stol اكمال اد PRICE LEVEL E نلی \ 00 R ر . . APOC ہ AD x Real GDP